Potential Lending Discrimination? Insights from Small Business Financing and New Venture Survival


  • Shaoming Cheng

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    • Address correspondence to: Shaoming Cheng, Department of Public Administration, Florida International University, 11120 SW 8th Street, Miami, FL 33199. E-mail: scheng@fiu.edu.

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    • Shaoming Cheng is assistant professor in the Department of Public Administration, Florida International University.


Previous literature provides potential lending discrimination evidence of disadvantaged women and minority entrepreneurs' high rate of business loan application denial and their unequal access to external and commercial credits in comparison with white business owners. This paper aims to expand the literature and discussions on small business loan discrimination from a new research direction, besides those on loan applications/denials and on loan terms, focusing on the consequences of small business loans in terms of new venture survivability. The proposed new research direction is consistent with similar research approaches in mortgage lending literature examining loan default rates and potential discrimination. The Kauffman Firm Survey data are used with appropriate hazards model for the analysis. Extensive creditworthiness and business survival determinants are applied for controlling for their influences across racial and ethnic groups. The main empirical finding is that after controlling for a wide variety of borrower, establishment, and regional characteristics, business closure rates for minority entrepreneurs are not higher than those for white business owners. This finding does not support the prediction of the model for lender bias against minority entrepreneurs.